DOL's New Proposal Sets $35K Overtime Threshold

Despite safeguards, Bloomberg notes the proposal is still likely to be a target of legal challenge.

The U.S. Department of Labor shared late Thursday a highly anticipated proposal to change overtime pay requirements. The proposal states that workers covered by the Fair Labor Standards Act who make less than 35,308 per year (or $679 per week), unless exempt, are automatically eligible for time-and-a-half pay for all hours worked beyond 40 a week. That’s a significant increase from the current threshold of $23,660 (or $455 per week) but not quite as steep as the $47,476 proposed by the Obama administration in a stalled regulation.

This would, according to Employee Benefit News, expand overtime eligibility to more than a million additional U.S. workers—far fewer than the Obama administration rule struck down by a federal judge in 2017. The projected date for rollout is January 1, 2020, the DOL said in a statement. It said it received “received extensive public input from six in-person listening sessions held around the nation and more than 200,000 comments as part of a 2017 Request for Information.”

“Our economy has more job openings than job seekers and more Americans are joining the labor force,” secretary Alexander Acosta said in a statement. “At my confirmation hearings, I committed to an update of the 2004 overtime threshold, and today’s proposal would bring common sense, consistency, and higher wages to working Americans.”

The proposal does not establish automatic, periodic increases of the salary threshold as the Obama proposal had. Instead, the department is asking the public to weigh in on whether and how the Labor Department might update overtime requirements every four years. It also doesn’t affect the current “duties test,” a checklist used to determine whether workers making more than the salary threshold are supervisors, and not entitled to overtime wages.

The last salary threshold increase took place in 2004 during the George W. Bush administration. The DOL is using the same economic methodology used to reach that standard, which department officials said should protect the proposal from litigation, according to Bloomberg.

Despite safeguards, Bloomberg notes the proposal is still likely to be a target of legal challenges from business groups concerned about rising payroll costs and worker advocates who say the department isn’t going far enough to expand overtime pay.

The blocked Obama proposal is still on appeal. It would have, by accounts, made about 4 million workers newly eligible for overtime—or four times what this new Trump Administration proposal does. A federal judge in Texas ruled the ceiling was set so high that it could sweep in some management workers who are supposed to be exempt from overtime pay protections. Business groups and 21 Republican-led states then sued, challenging the rule.

Many business groups were critical of the Obama overtime rule, saying it burdened, in particular, small business that would be forced to roll out new systems for tracking hours, recordkeeping, and reporting.

As for the public comments on the rule, there is a 60-day window to review the proposal. Bloomberg points out there will be a “race with the clock” to publish a finalized version before the 2020 election, “so that the regulation will be more difficult to scrap if a Democrat wins the White House.”

Recently, Tammy McCutchen, a former administrator of the DOL’s Wage and Hour Division, advised HR professions to hang onto their 2016 overtime plans in case the $47,476 threshold comes into play again, per HR Dive.

The stage is now set for potential court challenges, Bloomberg added. “Without any updates to the duties test, this is a really flawed rule,” Economic Policy Institute Senior Economist Heidi Shierholz told Bloomberg Law. “Millions of workers who would have gotten overtime protections under the 2016 rule that was exhaustively researched will not be covered by this rule.”